Console makers adapt to gamers' new habits

coAt the annual E3 video game show this week, console makers' main focus will not be on the latest games, but rather other forms of entertainment like music and movies that they hope will extend the life and functionality of their now-ageing boxes.

Microsoft's Xbox 360 and Sony's PlayStation 3 are now nearly seven years old, and both companies are looking to offer music, movies and even live television through them, in addition to games, to reignite consumers' interest.

Microsoft is also matching Nintendo's Wii U, the successor to the Wii due later this year, with a new feature that allows movies, photos and other media to be transferred on to a TV, via the Xbox, from a tablet or laptop running Windows 8.

The move comes as consoles and the video game publishers that supply them with disk-based games – a traditional area of strength for consoles – risk being left behind by new platforms and changes in gamers habits. Consoles' technical capabilities are also being overtaken by improvements in graphics in other devices, like tablets and PCs.

Game disk sales are down 31 per cent this year so far in the US – a fourth consecutive year of falls despite the number of consoles in households continuing to grow. Michael Pachter, video game analyst at Wedbush Securities, says publishers have released fewer titles and relied too much on sequels as they anticipate the end of the current console cycle.

"They have been reluctant to greenlight any new [intellectual property] – in 2007, Electronic Arts made 49 games, in 2012, they are making 19," he says.

"As far as casual gaming on consoles goes, clearly social gaming has taken away the Wii effect. The 85 year-old grandma or the 45-year-old housewife, who were playing Wii tennis or Wii Fit, are now playing FarmVille, [a popular Facebook game]."

The PC is also coming into its own again as a platform for social casual gaming, online multiplayer games and downloading digital content.

"The gaming audience is moving to the PC somewhat out of desire and somewhat out of necessity, which is what tends to happen when the console cycle is winding down," says John Davison, head of programming at the Gamespot gamers' website.

He says young gamers are using hand-me-down laptops to play sophisticated online games. The Steam download service for PC games has become very popular, as are new titles such as Activision Blizzard's Diablo III, which sold 3.5m copies in its first 24 hours last month – a record for a PC game.

Console gamers are also purchasing fewer disk-based games as they prefer extensions to blockbuster games that are available to buy and download.

"They are sticking with fewer games for longer, buying downloadable content or subscriptions for them, so the big games are becoming platforms in themselves, keeping their audiences engaged by constantly feeding them new content," says Mr Davison.

Digital sales are not included in the monthly software figures for the industry, meaning the picture is brighter than it looks for publishers such as Activision, which sells map pack extensions for its Call of Duty game and subscriptions for World of Warcraft, and Electronic Arts, which has been exporting its major franchises to Facebook and mobile gaming apps.

Mobile phones, tablets and smart TVs now have multi-core processors that can almost match the capabilities of consoles. In another shift, the chipmaker Nvidia last month unveiled graphics processors (GPU) for data centres that would deliver rich "cloud" gaming to even the simplest of devices. "I think the announcement from Nvidia of more formalised cloud GPU support is going to lead to more cloud gaming products coming out, it's a logical progression," says Brian Blau, video game analyst at the Gartner research firm.

Michael Pachter at Wedbush Securities says Microsoft is positioning itself to offer the next Xbox as an all-round entertainment appliance, sold at a subsidised price with a monthly subscription – similar to how cable or satellite TV boxes are now being offered. He points to a new experiment where the Xbox 360 is being offered for $99 with a $15 a month Xbox Live subscription for two years.

"The next console could be a $100 box where you sign up for five years," he says.

E3 attendees may listen in vain for news of Microsoft and Sony's next console offerings, expected in 2013, although Nintendo is expected to set a fourth-quarter 2012 launch date for the Wii U. One thing is certain: the forthcoming, eighth console generation will compete for gamers' time with many more alternatives than its predecessors.

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